Econophysics review: I. Empirical facts
AbstractThis article and the companion paper aim at reviewing recent empirical and theoretical developments usually grouped under the term Econophysics. Since the name was coined in 1995 by merging the words 'Economics' and 'Physics', this new interdisciplinary field has grown in various directions: theoretical macroeconomics (wealth distribution), microstructure of financial markets (order book modeling), econometrics of financial bubbles and crashes, etc. We discuss the interactions between Physics, Mathematics, Economics and Finance that led to the emergence of Econophysics. We then present empirical studies revealing the statistical properties of financial time series. We begin the presentation with the widely acknowledged 'stylized facts', which describe the returns of financial assets—fat tails, volatility clustering, autocorrelation, etc.—and recall that some of these properties are directly linked to the way 'time' is taken into account. We continue with the statistical properties observed on order books in financial markets. For the sake of illustrating this review, (nearly) all the stated facts are reproduced using our own high-frequency financial database. Finally, contributions to the study of correlations of assets such as random matrix theory and graph theory are presented. The companion paper will review models in Econophysics from the point of view of agent-based modeling.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Quantitative Finance.
Volume (Year): 11 (2011)
Issue (Month): 7 ()
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Web page: http://www.tandfonline.com/RQUF20
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- Li-Xin Wang, 2014. "Dynamical Models of Stock Prices Based on Technical Trading Rules Part II: Analysis of the Models," Papers 1401.1891, arXiv.org.
- Desislava Chetalova & Thilo A. Schmitt & Rudi Sch\"afer & Thomas Guhr, 2013. "Portfolio return distributions: Sample statistics with non-stationary correlations," Papers 1308.3961, arXiv.org.
- Mehdi Lallouache & Fr\'ed\'eric Abergel, 2013. "Empirical properties of the foreign exchange interdealer market," Papers 1307.5440, arXiv.org.
- Ioane Muni Toke, 2013. "The order book as a queueing system: average depth and influence of the size of limit orders," Papers 1311.5661, arXiv.org.
- Seemann, Lars & Hua, Jia-Chen & McCauley, Joseph L. & Gunaratne, Gemunu H., 2012. "Ensemble vs. time averages in financial time series analysis," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(23), pages 6024-6032.
- Paulo Ferreira, 2012. "Testing serial dependence in the stock markets of the G7 countries, Portugal, Spain and Greece," CEFAGE-UE Working Papers 2012_24, University of Evora, CEFAGE-UE (Portugal).
- Ladislav Kristoufek, 2013. "Testing power-law cross-correlations: Rescaled covariance test," Papers 1307.4727, arXiv.org, revised Aug 2013.
- Schinckus, C., 2013. "Between complexity of modelling and modelling of complexity: An essay on econophysics," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(17), pages 3654-3665.
- Salvador Pueyo, 2013. "Is it a power law distribution? The case of economic contractions," Papers 1310.2567, arXiv.org.
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